High Speed Rail 2 business case ridiculed by National Audit Office

A devastating report by Whitehall’s spending watchdog demolishing the business
case for a high speed rail network has dealt a major blow the Government’s
flagship project.

Margaret Hodge MP, chairman of the Public Accounts Committee which will consider the report, said: 'The Department has produced a business case that is clearly not up to scratch. Some of their assumptions are just ludicrous.'Photo: DANIEL JONES

The National Audit Office, which monitors Government spending on behalf of MPs, has raised doubts over the viability of the £32.7 billion scheme to run 225 mph trains on a 351-mile route from London to Leeds and Manchester via Birmingham.

It is the latest blow to be suffered by the Government over the project and comes within months of the High Court ordering the Department for Transport to re-run its consultation over its compensation arrangements for up to 300,000 households which have been blighted by the plans.

Despite being backed by all three parties the project, which will see trains hurtling through the countryside, including the Chilterns, an Area of Outstanding Natural Beauty, has faced fierce opposition from environmentalists and many Tory MPs whose constituency lie on the route.

The report, ridiculing many of the key economic arguments put forward by supporters of the scheme, will be particularly unpalatable reading for Patrick McLoughlin, the Transport Secretary.

Sources close to Mr McLoughlin said the NAO’s analysis was out of date. One said: “We are not questioning the scrutiny but we don’t think it fairly reflects where we now.”

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Margaret Hodge MP, chairman of the Public Accounts Committee which will consider the report, was withering in her reaction. She said: "The Department has produced a business case that is clearly not up to scratch. Some of their assumptions are just ludicrous.”

Successive Transport Secretaries have argued that the line will not only generate jobs but also “rebalance” the economy between north and south.

These assertions were dismissed by the NAO. “The analysis does not estimate how many of these jobs are additional and how many would have been created without investment in a high-speed line.

“The business case provides little supporting evidence to prove that a high-speed line will help to rebalance the economy by supporting regional growth.”

Another key plank in the case for HS2 - the business benefit of faster journeys - was also ridiculed by the NAO.

It said: “The Department’s methodology uses a simplifying assumption that time spent travelling is unproductive and business travellers will use all the time saved from faster journeys to work.

“Research commissioned by the department suggests that business travellers do work on trains for at least part of their journeys, and a proportion of the time saved from faster journeys may be used for leisure purposes.”

The DfT was also criticised for basing its arguments on data which was more than a decade old.

In its report the NAO also questioned whether the DfT, which was involved in a number of other major projects at a time when it had undergone “considerable organisational change” could even meet the timetable it had set itself.

Under the Government’s plans, the first trains, running from London to Birmingham, should enter service in 2032.

Not only was the timetable tight, but the report also questioned whether it was affordable with the huge financial commitment to HS2 in danger of restricting the Government’s ability to pay for other major capital projects.

The NAO report also questioned the “limited evidence” of demand for general growth in rail travel, which underlies the business case for the high speed rail link.

The timetable for planning phase one of the project - from London to Birmingham with work due to start in 2016/17 - was “challenging”, the NAO said.

This challenging timetable “makes delivering this work difficult and increases the risk that the programme will have a weak foundation for securing and demonstrating success in the future”, the report said.

Expressing “reservations” about the business case for HS2, the NAO said the Department for Transport’s methodology for appraising the project put a high emphasis on journey-time savings, from faster and more reliable journeys.

Amyas Morse, the head of the NAO, said: “It’s too early in the HS2 programme to conclude on the likelihood of its achieving value for money. Our concern at this point is the lack of clarity around the department’s objectives.”

Government sources said that NAO’s report was out of date and had failed to take into account a court room battle in January.

Transport Secretary Patrick McLoughlin said: "I do not accept the NAO's core conclusion. This is because it depends too much on out-of-date analysis and does not give due weight to the good progress that has been made since last year.

"This includes the appointment of an expert management team and the announcement of detailed plans for the line north of Birmingham. The case for HS2 is clear. Without it the key rail routes connecting London, the Midlands and northern England will be overwhelmed.

"HS2 will provide the capacity needed in a way that will generate hundreds of thousands of jobs and billions of pounds worth of economic benefits.

"Economic modelling is just the start of the story. If we only relied on modelling we would not have built the M1, parts of the M25 or the (Tube's) Jubilee line extension to Canary Wharf.

"We are not building HS2 simply because the computer says 'yes'. We are building it because it is the right thing to do to make Britain a stronger and more prosperous place."

Alison Munro, HS2’s chief executive, added: “Birmingham's position at the heart of Britain's new high speed rail network was set out in January with the publication of the preferred route for phase two.

“Along with significantly reduced journey times to Leeds, London, Manchester, Sheffield and the East Midlands, HS2 will free up much-needed capacity on existing lines.

“The region will also benefit from an expected 8,000 jobs created through the regeneration and development of the HS2 interchange at Birmingham Airport and Curzon Street stations, as well as opportunities from the 9,000 construction jobs on phase one.”